Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010              or             

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-12289

SEACOR Holdings Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   13-3542736

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

2200 Eller Drive, P.O. Box 13038,   33316
Fort Lauderdale, Florida   (Zip Code)
(Address of Principal Executive Offices)  

954-523-2200

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  x   Accelerated filer  ¨  

Non-accelerated filer  ¨

(Do not check if a smaller

reporting company)

  Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b 2 of the Exchange Act). Yes  ¨    No  x

The total number of shares of common stock, par value $.01 per share, outstanding as of July 23, 2010 was 21,218,284. The Registrant has no other class of common stock outstanding.

 

 

 


Table of Contents

SEACOR HOLDINGS INC.

Table of Contents

 

Part I.    Financial Information    3
     
   Item 1.    Financial Statements (Unaudited)    3
     
     

Condensed Consolidated Balance Sheets as of June 30, 2010

and December 31, 2009

   3
     
     

Condensed Consolidated Statements of Income for the

Three and Six Months Ended June 30, 2010 and 2009

   4
     
     

Condensed Consolidated Statement of Changes in Equity for the

Six Months Ended June 30, 2010

   5
     
     

Condensed Consolidated Statements of Cash Flows for the

Six Months Ended June 30, 2010 and 2009

   6
     
      Notes to Condensed Consolidated Financial Statements    7
     
   Item 2.   

Management’s Discussion and Analysis of Financial Condition and Results of

Operations

   23
     
   Item 3.    Quantitative and Qualitative Disclosures About Market Risk    43
     
   Item 4.    Controls and Procedures    43
     
Part II.    Other Information    44
     
   Item 1A.    Risk Factors    44
     
   Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds    45
     
   Item 4.    Submission of Matters to a Vote of Security Holders    46
     
   Item 6.    Exhibits    46

 

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Table of Contents

PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)

 

    June 30,
2010
    December 31,
2009
 
ASSETS    

Current Assets:

   

Cash and cash equivalents

  $ 398,498      $ 465,904   

Restricted cash

    9,421        34,014   

Marketable securities

    86,457        68,139   

Receivables:

   

Trade, net of allowance for doubtful accounts of $3,745 and $3,608 in 2010 and 2009, respectively

    449,142        301,143   

Other

    50,345        78,689   

Inventories

    74,434        76,949   

Deferred income taxes

    3,354        3,354   

Prepaid expenses and other

    24,075        15,725   
               

Total current assets

    1,095,726        1,043,917   
               

Property and Equipment

    2,896,777        2,833,011   

Accumulated depreciation

    (821,641     (754,263
               

Net property and equipment

    2,075,136        2,078,748   
               

Investments, at Equity, and Receivables from 50% or Less Owned Companies

    201,474        186,814   

Construction Reserve Funds & Title XI Reserve Funds

    227,184        289,750   

Goodwill

    54,653        54,571   

Intangible Assets

    21,195        23,554   

Other Assets, net of allowance for doubtful accounts of $2,301 in 2010 and 2009

    51,522        46,265   
               
  $ 3,726,890      $ 3,723,619   
               
LIABILITIES AND EQUITY    

Current Liabilities:

   

Current portion of long-term debt

  $ 14,154      $ 36,436   

Current portion of capital lease obligations

    998        966   

Accounts payable and accrued expenses

    223,277        135,425   

Other current liabilities

    209,571        142,285   
               

Total current liabilities

    448,000        315,112   
               

Long-Term Debt

    682,134        748,704   

Capital Lease Obligations

    6,067        6,624   

Deferred Income Taxes

    572,985        575,440   

Deferred Gains and Other Liabilities

    96,510        111,848   
               

Total liabilities

    1,805,696        1,757,728   
               

Equity:

   

SEACOR Holdings Inc. stockholders’ equity:

   

Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued nor outstanding

             

Common stock, $.01 par value, 60,000,000 shares authorized; 35,752,017 and 35,550,934 shares issued in 2010 and 2009, respectively

    358        356   

Additional paid-in capital

    1,191,943        1,182,023   

Retained earnings

    1,614,264        1,546,581   

Shares held in treasury of 14,533,733 and 12,938,108 in 2010 and 2009, respectively, at cost

    (887,129     (768,438

Accumulated other comprehensive loss:

   

Cumulative translation adjustments, net of tax

    (5,046     (3,056

Derivative losses on cash flow hedges, net of tax

    (2,793     (204
               
    1,911,597        1,957,262   

Noncontrolling interests in subsidiaries

    9,597        8,629   
               

Total equity

    1,921,194        1,965,891   
               
  $ 3,726,890      $ 3,723,619   
               
   

The accompanying notes are an integral part of these condensed consolidated financial statements and should be read in conjunction herewith.

 

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Table of Contents

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share data, unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2010     2009     2010     2009  

Operating Revenues

   $ 694,576      $ 389,233      $ 1,089,151      $ 788,749   
                                

Costs and Expenses:

        

Operating

     484,742        256,131        797,047        504,543   

Administrative and general

     46,108        40,058        86,999        78,740   

Depreciation and amortization

     41,608        39,828        83,005        79,092   
                                
     572,458        336,017        967,051        662,375   
                                

Gains (Losses) on Asset Dispositions and Impairments, Net

     4,398        (15     18,057        16,745   
                                

Operating Income

     126,516        53,201        140,157        143,119   
                                

Other Income (Expense):

        

Interest income

     1,863        578        3,226        1,621   

Interest expense

     (11,264     (14,075     (23,588     (28,412

Debt extinguishment gains (losses), net

     (364     (78     (368     1,285   

Marketable security gains (losses), net

     (5,406     11,829        (3,445     7,848   

Derivative gains (losses), net

     (4,721     3,765        (1,945     7,376   

Foreign currency gains (losses), net

     (7,500     6,847        (10,201     7,505   

Other, net

     46        (1     646        189   
                                
     (27,346     8,865        (35,675     (2,588
                                

Income Before Income Tax Expense and Equity In Earnings of 50% or Less Owned Companies

     99,170        62,066        104,482        140,531   

Income Tax Expense

     37,399        22,916        39,715        51,115   
                                

Income Before Equity in Earnings of 50% or Less Owned Companies

     61,771        39,150        64,767        89,416   

Equity in Earnings of 50% or Less Owned Companies, Net of Tax

     2,876        3,491        3,745        7,018   
                                

Net Income

     64,647        42,641        68,512        96,434   

Net Income attributable to Noncontrolling Interests in Subsidiaries

     565        333        829        1,132   
                                

Net Income attributable to SEACOR Holdings Inc.

   $ 64,082      $ 42,308      $ 67,683      $ 95,302   
                                

Basic Earnings Per Common Share of SEACOR Holdings Inc.

   $ 2.95      $ 2.13      $ 3.08      $ 4.81   

Diluted Earnings Per Common Share of SEACOR Holdings Inc.

   $ 2.93      $ 1.91      $ 3.05      $ 4.27   

Weighted Average Common Shares Outstanding:

        

Basic

     21,733,003        19,844,579        21,999,905        19,803,406   

Diluted

     21,905,401        23,528,365        22,187,114        23,511,361   

The accompanying notes are an integral part of these condensed consolidated financial statements and should be read in conjunction herewith.

 

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SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(in thousands, unaudited)

 

    SEACOR Holdings Inc. Stockholders’ Equity                    
    Common
Stock
  Additional
Paid-In
Capital
    Retained
Earnings
  Shares
Held In
Treasury
    Accumulated
Other
Comprehensive
Loss
    Non-
Controlling
Interests In
Subsidiaries
    Total
Equity
    Compre-
hensive
Income
 

December 31, 2009

  $ 356   $ 1,182,023      $ 1,546,581   $ (768,438   $ (3,260   $ 8,629      $ 1,965,891     

Issuance of common stock:

               

Employee Stock Purchase Plan

                   1,287                      1,287     

Exercise of stock options

        1,640                                 1,640     

Director stock awards

        161                                 161     

Restricted stock and restricted stock units

    2     (5         154                      151     

Purchase of treasury shares

                   (119,985                   (119,985  

Amortization of share awards

        7,970                                 7,970     

Cancellation of restricted stock

        147            (147                       

Purchase of subsidiary shares from noncontrolling interests

        7                          (46     (39  

Dividends paid to noncontrolling interests

                                 (225     (225  

Cash received from noncontrolling interests

                                 410        410     

Comprehensive income:

               

Net income

               67,683                   829        68,512      $ 68,512   

Other comprehensive loss

                          (4,579            (4,579     (4,579
                                                           

Six months ended June 30, 2010

  $ 358   $ 1,191,943      $ 1,614,264   $ (887,129   $ (7,839   $ 9,597      $ 1,921,194      $ 63,933   
                                                           

The accompanying notes are an integral part of these consolidated financial statements and should be read in conjunction herewith.

 

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SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

     Six Months Ended
June 30,
 
     2010     2009  

Net Cash Provided by Operating Activities

   $ 153,034      $ 188,629   
                

Cash Flows from Investing Activities:

    

Purchases of property and equipment

     (115,001     (77,052

Proceeds from disposition of property and equipment

     58,252        55,544   

Cash settlements on derivative transactions, net

     446        (380

Investments in and advances to 50% or less owned companies

     (30,190     (6,370

Return of investments and advances from 50% or less owned companies

     10,290        2,036   

Proceeds on sale of investments in 50% or less owned companies

            136   

(Advances) principal payments on third party notes receivable, net

     2,786        (133

Net (increase) decrease in restricted cash

     24,593        (51

Net decrease in construction reserve funds and Title XI reserve funds

     62,566        40,171   

Net increase in escrow deposits on like-kind exchanges

     (289       

Investments in leases, net

     (17,665     (1,938

Business acquisitions, net of cash acquired

     (227     (1,473

Cash disposed on sale of subsidiary, net of cash proceeds on sale

            (154
                

Net cash provided by (used in) investing activities

     (4,439     10,336   
                

Cash Flows from Financing Activities:

    

Payments on long-term debt and capital lease obligations

     (70,835     (69,305

Net payments on inventory financing arrangements

     (19,268     (22,169

Proceeds from issuance of long-term debt, net of offering costs

            25,000   

Common stock acquired for treasury

     (119,985       

Proceeds and tax benefits from share award plans

     2,958        1,463   

Purchase of subsidiary shares from noncontrolling interests

     (39     (1,210

Cash received from (dividends paid to) noncontrolling interests, net

     185        (1,068
                

Net cash used in financing activities

     (206,984     (67,289
                

Effects of Exchange Rate Changes on Cash and Cash Equivalents

     (9,017     8,508   
                

Net Increase (Decrease) in Cash and Cash Equivalents

     (67,406     140,184   

Cash and Cash Equivalents, Beginning of Period

     465,904        275,442   
                

Cash and Cash Equivalents, End of Period

   $ 398,498      $ 415,626   
                
    

The accompanying notes are an integral part of these condensed consolidated financial statements and should be read in conjunction herewith.

 

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SEACOR HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Basis of Presentation and Accounting Policy

The condensed consolidated financial information for the three and six months ended June 30, 2010 and 2009 has been prepared by the Company and has not been audited by its independent registered public accounting firm. The condensed consolidated financial statements include the accounts of SEACOR Holdings Inc. and its consolidated subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made to present fairly the Company’s financial position as of June 30, 2010, its results of operations for the three and six months ended June 30, 2010 and 2009, its changes in equity for the six months ended June 30, 2010 and its cash flows for the six months ended June 30, 2010 and 2009. Results of operations for the interim periods presented are not necessarily indicative of operating results for the full year or any future periods.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

Unless the context otherwise indicates, any reference in this Quarterly Report on Form 10-Q to the “Company” refers to SEACOR Holdings Inc. and its consolidated subsidiaries and any reference in this Quarterly Report on Form 10-Q to “SEACOR” refers to SEACOR Holdings Inc.

Revenue Recognition. As of June 30, 2010, the Company had deferred $18.5 million of vessel charter hire scheduled to be paid through the conveyance of a limited net profit interest in developmental oil and gas producing properties owned by a customer. Of this amount, $7.5 million was deferred during the six months ended June 30, 2010. The Company expects to defer an additional $3.5 million of vessel charter hire under this arrangement through August 2010. The customer has provided payout estimates indicating the Company will receive future payments of $10.8 million in 2010 and $11.2 million in 2011. Such payments are contingent upon future production. Production from the properties commenced in April 2010 and the first payment of $0.1 million was received and recognized as revenue in June 2010. The Company will recognize revenues as cash is received or earlier should future payments become determinable.

Reclassifications. Certain reclassifications of prior year information have been made to conform to the presentation of current year information.

 

2. Financial Instruments

The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs derived from observable market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

 

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The Company’s financial assets and liabilities as of June 30, 2010 that are measured at fair value on a recurring basis were as follows (in thousands):

 

     Level 1    Level 2    Level 3

ASSETS

        

Marketable securities

   $ 74,741    $ 11,716    $

Derivative instruments (included in other receivables)

     1,846      3,681     

Construction reserve funds and Title XI reserve funds

     227,184          

LIABILITIES

        

Short sale of marketable securities (included in other current liabilities)

     15,342          

Derivative instruments (included in other current liabilities)

     6,685      18,944     

The estimated fair value of the Company’s other financial assets and liabilities as of June 30, 2010 were as follows (in thousands):

 

     Carrying
Amount
   Estimated
Fair Value

ASSETS

     

Cash, cash equivalents and restricted cash

   $ 407,919    $ 407,919

Investments, at cost, in 50% or less owned companies (included in other assets)

     7,847      see below

Notes receivable from other business ventures (included in other assets)

     4,686      see below

LIABILITIES

     

Long-term debt, including current portion

     696,288      714,534

The carrying value of cash, cash equivalents and restricted cash approximates fair value. The fair value of the Company’s long-term debt was estimated based upon quoted market prices or by using discounted cash flow analyses based on estimated current rates for similar types of arrangements. It was not practicable to estimate the fair value of the Company’s investments, at cost, in 50% or less owned companies because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs. It was not practicable to estimate the fair value of the Company’s notes receivable from other business ventures because the timing of settlement of these notes is not certain. Considerable judgment was required in developing certain of the estimates of fair value and, accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

Marketable Securities. Marketable security gains (losses), net include losses of $5.3 million and gains of $1.1 million for the three months ended June 30, 2010 and 2009, respectively, related to marketable security positions held by the Company as of June 30, 2010. Marketable security gains (losses), net include losses of $1.9 million and $0.3 million for the six months ended June 30, 2010 and 2009, respectively, related to marketable security positions held by the Company as of June 30, 2010.

 

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3. Derivative Instruments and Hedging Strategies

Derivative instruments are classified as either assets or liabilities based on their individual fair values. Derivative assets and liabilities are included in other receivables and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets. The fair values of the Company’s derivative instruments as of June 30, 2010 were as follows (in thousands):

 

     Derivative
Asset
   Derivative
Liability

Derivatives designated as hedging instruments:

     

Forward currency exchange contracts (fair value hedges)

   $    $ 9,775

Interest rate swap agreements (cash flow hedges)

          4,929
             
          14,704
             

Derivatives not designated as hedging instruments:

     

Options on equities and equity indices

     130      2,018

Forward currency exchange, option and future contracts

     291      5,461

Interest rate swap agreements

          2,434

Commodity swap, option and future contracts:

     

Exchange traded

     1,666      356

Non-exchange traded

     3,440      621

U.S. treasury notes and bond future and option contracts

          35
             
     5,527      10,925
             
   $ 5,527    $ 25,629
             

Fair Value Hedges. As of June 30, 2010, the Company has designated certain of its forward currency exchange contracts with notional values of €76.0 million as fair value hedges in respect of capital commitments denominated in euros for assets scheduled to be delivered in 2010 through 2013. By entering into these forward currency exchange contracts, the Company has fixed a portion of its euro capital commitments in U.S. dollars to protect against currency fluctuations. During the six months ended June 30, 2010, the Company designated €68.0 million notional value of its forward currency exchange contracts as fair value hedges, in addition to €16.0 million previously so designated as of December 31, 2009. During the six months ended June 30, 2010, the Company dedesignated €8.0 million notional value of these contracts as fair value hedges.

The Company recognized gains (losses) on derivative instruments designated as fair value hedges for the six months ended June 30 as follows (in thousands):

 

       Derivative gains
(losses), net
 
       2010      2009  

Forward currency exchange contracts, effective and ineffective portions

     $ (11,503    $ (203

Increase in fair value of hedged items included in property and equipment corresponding to effective portion of derivative losses

       11,441         516   
                   
     $ (62    $ 313   
                   
       

Cash Flow Hedges. As of June 30, 2010, the Company is a party to various interest rate swap agreements with maturities ranging from 2013 to 2014 that have been designated as cash flow hedges. These agreements call for the Company to pay fixed interest rates ranging from 2.25% to 2.85% on aggregate notional values of $125.0 million and receive a variable interest rate based on LIBOR on these notional values. By entering into these

 

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interest rate swap agreements, the Company has converted the variable LIBOR component of certain of its outstanding borrowings to a fixed interest rate. During the six months ended June 30, 2010, one of the Company’s Offshore Marine Services joint ventures dedesignated its interest rate swap as a cash flow hedge.

The Company recognized gains (losses) on derivative instruments designated as cash flow hedges for the six months ended June 30 as follows (in thousands):

 

     Other
comprehensive
income (loss)
    Derivative gains
(losses),  net
 
     2010     2009       2010         2009    

Interest rate swap agreements, effective portion

   $ (5,875   $ 1,265      $      $   

Interest rate swap agreements, ineffective portion

                   (60     (250

Reclassification of derivative (gains) losses to interest expense or equity in earnings of 50% or less owned companies

     1,892        (163              
                                
   $ (3,983   $ 1,102      $ (60   $ (250
                                

Other Derivative Instruments. The Company recognized gains (losses) on derivative instruments not designated as hedging instruments for the six months ended June 30 as follows (in thousands):

 

     Derivative gains
(losses), net
 
     2010     2009  

Options on equities and equity indices

   $ 613      $ 2,627   

Forward currency exchange, option and future contracts

     (6,675     2,921   

Interest rate swap agreements

     (2,753     137   

Commodity swap, option and future contracts:

    

Exchange traded

     8,734        (502

Non-exchange traded

     338        2,153   

U.S. treasury notes and bond future and option contracts

     (2,080     (23
                
   $ (1,823   $ 7,313   
                

The Company holds positions in publicly traded equity options that convey the right or obligation to engage in a future transaction on the underlying equity security or index. The Company’s investment in equity options primarily includes positions in energy, marine, transportation and other related businesses. These contracts are typically entered into to mitigate the risk of changes in market value of marketable security positions that the Company is either about to acquire, has acquired or is about to dispose of.

The Company has entered into and settled forward currency exchange, option and future contracts with respect to various foreign currencies. As of June 30, 2010, the outstanding forward currency exchange contracts translated into a net purchase of foreign currencies with an aggregate U.S. dollar equivalent of $47.0 million. These contracts enable the Company to buy currencies in the future at fixed exchange rates, which could offset possible consequences of changes in foreign exchange rates with respect to the Company’s business conducted in Europe, Africa, Mexico, Central and South America, the Middle East and Asia. The Company generally does not enter into contracts with forward settlement dates beyond twelve to eighteen months.

The Company has entered into various interest rate swap agreements maturing in 2012 and 2013 that call for the Company to pay fixed interest rates ranging from 1.79% to 2.59% on aggregate notional values of $72.3 million and receive a variable interest rate based on LIBOR on these notional values. In addition, one of the

 

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Company’s Offshore Marine Services 50-50 joint ventures has entered into an interest rate swap agreement maturing in 2014. This instrument calls for the joint venture to pay a fixed interest rate of 3.05% on the amortized notional value of $28.0 million and receive a variable interest rate based on LIBOR on the notional value. The general purpose of these interest rate swap agreements is to provide protection against increases in interest rates, which might lead to higher interest costs for the Company or its joint venture.

The Company has entered into and settled positions in various commodity swap, option and future contracts (primarily natural gas, crude oil, gasoline, ethanol, sugar and rice). The general purpose of these transactions is to provide value to the Company should there be a sustained decline in the price of commodities that could lead to a reduction in the market values and cash flows of the Company’s offshore, inland river and commodity trading and logistics businesses.

The Company has entered into various forward contracts with unrelated third parties to buy and sell commodities. These contracts are non-exchange traded and typically result in physical delivery of the underlying commodity upon settlement. As of June 30, 2010, the Company carried inventory (primarily ethanol) of $29.3 million relating to such settled transactions.

The Company has entered into and settled various positions in U.S. treasury notes and bonds through futures or options on futures tied to U.S. treasury notes. The general purpose of these transactions is to provide value to the Company should the price of U.S. treasury notes and bonds decline, leading to generally higher interest rates, which might lead to higher interest costs for the Company.

 

4. Business Acquisitions

PIER Acquisition. On December 1, 2009, the Company acquired all of the issued and outstanding shares of PIER Systems Inc. (“PIER”), a provider of crisis communication consulting services and software in the United States and abroad, for $2.3 million ($1.7 million paid in 2009, and accrued contingent consideration of $0.6 million). The selling stockholders of PIER have the opportunity to receive additional consideration of up to $1.3 million based upon certain performance measures over the period from the date of acquisition through May 2011. The Company performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded. The preliminary fair value analysis is pending the completion of a final valuation for the acquired assets and liabilities.

RMA Acquisition. On October 1, 2006, the Company acquired all of the issued and outstanding shares of Response Management Associates, Inc. (“RMA”), a provider of environmental consulting services, for $12.5 million. The selling stockholder of RMA has the opportunity to receive additional consideration of up to $8.5 million based upon certain performance measures over the period from the date of the acquisition through September 30, 2012, which will be recognized by the Company as additional cost of the acquisition when the contingency is resolved and when any additional consideration is distributable. During the six months ended June 30, 2010, the Company paid $0.2 million of additional consideration in accordance with the acquisition agreement. As of June 30, 2010, the Company has paid $2.3 million, in the aggregate, of additional consideration, which was recorded as additional goodwill.

Purchase Price Allocation. The following table summarizes the allocation of the purchase price for the Company’s business acquisitions during the six months ended June 30, 2010 (in thousands):

 

Property and equipment

   $ 824   

Goodwill

     210   

Accounts payable and other current liabilities

     (807
        

Purchase price

   $ 227   
        

 

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5. Equipment Acquisitions, Dispositions and Depreciation and Impairment Policies

During the six months ended June 30, 2010, capital expenditures were $115.0 million. Equipment deliveries during the period included one offshore support vessel, 38 inland river dry cargo barges and three helicopters.

During the six months ended June 30, 2010, the Company sold two offshore support vessels, one helicopter, one ocean liquid tank barge and other equipment. In addition, the Company received insurance proceeds related to the nationalization of one of its offshore support vessels and the total constructive loss of another offshore support vessel under construction. The Company received $58.3 million on the disposition of these assets, including the insurance proceeds, and recognized net gains of $18.1 million.

During the six months ended June 30, 2010, the Company acquired two aircraft, spare engines and other equipment for $19.0 million. Upon acquisition, the assets were leased to third parties for various terms expiring through 2014. The Company has accounted for the leases as sales type leases because ownership of the assets transfers to the lessee at the end of the lease term.

Equipment, stated at cost, is depreciated using the straight-line method over the estimated useful life of the asset to an estimated salvage value. With respect to each class of asset, the estimated useful life is based upon a newly built asset being placed into service and represents the point at which it is typically not justifiable for the Company to continue to operate the asset in the same or similar manner. From time to time, the Company may acquire older assets that have already exceeded the Company’s useful life policy, in which case the Company depreciates such assets based on its best estimate of remaining useful life, typically the next survey or certification date.

As of June 30, 2010, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:

 

Offshore support vessels

   20

U.S.-flag tankers(1)

   25

Inland river dry cargo and deck barges

   20

Inland river liquid tank barges

   25

Inland river towboats

   25

Helicopters

   12

Harbor and offshore tugs

   25

Ocean liquid tank barges

   25

 

(1) Subject to Oil Pollution Act of 1990 (“OPA 90”) requirements.

The Company performs an impairment analysis of long-lived assets used in operations, including intangible assets, when indicators of impairment are present. If the carrying value of the assets is not recoverable, as determined by the estimated undiscounted cash flows, the carrying value of the assets is reduced to fair value. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate.

The Company believes the Seabulk America is one of six vessels designed and certified to carry complicated chemical cargoes in the domestic coastwise trade. Given the overriding effects of the global economic slowdown, demand for the Seabulk America’s specialized capabilities has remained soft through June 30, 2010. The Company believes the chemical industry has endured a cyclical market down-turn and, as anticipated, the market appears to be improving with indications of positive future prospects. The Seabulk America requires a regulatory drydocking during the third quarter of 2010, a requirement for continued operation, and a decision as to whether or not this expenditure should be incurred will be made against the then prevailing market conditions. A decision

 

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to cease vessel operations and lay-up the Seabulk America could potentially result in a significant impairment charge. The carrying value of the Seabulk America was $24.1 million as of June 30, 2010 and it contributed operating revenues of $4.4 million during the six months ended June 30, 2010.

 

6. Investments at Equity and Receivables from 50% or Less Owned Companies

ICP. On November 20, 2009, the Company and an ingredients and distillery product manufacturer formed Illinois Corn Processing LLC (“ICP”), a 50-50 joint venture to own and operate an alcohol manufacturing facility dedicated to the production of alcohol for beverage, industrial and fuel applications. The Company provided a $10.0 million five-year term loan and a $20.0 million three-year revolving line of credit to ICP subject to certain borrowing restrictions. During the six months ended June 30, 2010, the Company and its joint venture partner each contributed an additional $1.0 million to acquire additional equipment. During the six months ended June 30, 2010, ICP had net borrowings under the terms of the term loan and revolving line of credit of $11.2 million. As of June 30, 2010, the outstanding balances under the term loan and revolving line of credit were $9.8 million and $5.5 million, respectively.

SCFCo. On February 20, 2007, the Company and a third party in South America formed SCFCo Holdings LLC (“SCFCo”), a 50-50 joint venture, to operate towboats and dry cargo barges on the Parana-Paraguay Rivers. During the six months ended June 30, 2010, SCFCo agreed to further expand its operation to include three additional towboats, 60 additional dry cargo barges and make improvements to certain of its terminal operations. In order to purchase the additional equipment and make the improvements, SCFCo expanded its bank financing and each joint venture partner funded additional capital of $9.1 million and a temporary working capital advance of $3.7 million.

 

7. Commitments and Contingencies

The Company’s unfunded capital commitments as of June 30, 2010 consisted primarily of offshore support vessels, helicopters, an aircraft, an interest in a dry-bulk articulated tug-barge, a harbor and offshore tug and other equipment. These commitments totaled $247.0 million, of which $115.9 million is payable during the remainder of 2010 with the balance payable through 2013. Of the total unfunded capital commitments, $2.8 million may be terminated without further liability.

The Company has guaranteed the payment of amounts owed by one of its joint ventures under a vessel charter agreement that expires in 2011 and has guaranteed amounts owed under banking facilities by certain of its joint ventures with expirations through 2015. As of June 30, 2010, the total amount guaranteed by the Company under these arrangements was $27.5 million. Additionally, as of June 30, 2010, the Company had an uncalled capital commitment to one of its joint ventures for $1.4 million.

Under United States law, “United States persons” are prohibited from business activities and contracts in certain countries, including Sudan and Iran. Relating to these prohibitions, Seabulk International, Inc., (“Seabulk”) a subsidiary of SEACOR acquired in July 2005, filed three reports with and submitted documents to the Office of Foreign Asset Control (“OFAC”) of the U.S. Department of Treasury in December 1999 and January and May 2002. One of the reports was also filed with the Bureau of Export Administration of the U.S. Department of Commerce. The reports and documents related to certain limited charters with third parties involving three Seabulk vessels that called in Sudan for several months in 1999 and January 2000 and charters with third parties involving several of Seabulk’s vessels that called in Iran in 1998. In March 2003, Seabulk received notification from OFAC that the case has been referred to its Civil Penalties Division. Should OFAC determine that these activities constituted violations of the laws or regulations, civil penalties, including fines, could be assessed against Seabulk or certain individuals who knowingly participated in such activity. The Company cannot predict the extent of such penalties; however, management does not believe the outcome of these matters will have a material impact on its consolidated financial position or its results of operations.

 

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During 2006 and 2007, Marine Transportation Services (“MTS”) had two of its tankers retrofitted to a double-hull configuration in a foreign shipyard to enable each of them to continue to transport crude oil and petroleum products beyond their OPA 90 mandated retirement dates in 2011. Both vessels operate in the U.S. coastwise trade that, under the Shipping Acts, is restricted to vessels built or rebuilt in the United States. In May 2005, MTS received a determination from the U.S. Coast Guard (“USCG”), which administers the United States build requirements of the Shipping Acts, concluding the retrofit work would not constitute a foreign rebuilding and therefore would not jeopardize the tankers’ eligibility to operate in the U.S. coastwise trade. MTS completed the retrofit work in the foreign shipyard in reliance upon the USCG’s determination, which MTS believes was correct and in accord with the USCG’s long-standing regulations and interpretations. On July 9, 2007, a U.S. shipbuilders trade association and two operators of tankers in the U.S. coastwise trade (“Shipbuilders”) commenced a civil action in the U.S. District Court for the Eastern District of Virginia, Shipbuilders Council of America, Inc., et al. v. U.S. Department of Homeland Security, et al., No. 1:07cv665 (E.D. Va.) (the “SB Trader Litigation”), in which they sought to have the court set aside the USCG’s determination and direct the USCG to revoke the coastwise license of one of the two retrofitted tankers, the Seabulk Trader. MTS intervened in the action to assist the USCG in defending its determination. On April 24, 2008, the Court issued a Memorandum Opinion granting a motion for summary judgment by Shipbuilders setting aside the USCG’s determination and remanding the matter to the USCG for further proceedings with instructions to revoke the coastwise endorsement of the Seabulk Trader. On April 30, 2008, MTS appealed the decision to the U.S. Court of Appeals for the Fourth Circuit (the “Court of Appeals”), and the lower court’s decision was stayed pending appeal, subject to certain terms (which MTS has also separately appealed). Those terms require that MTS pay to the plaintiffs 12.5% of the revenue generated by the Seabulk Trader from November 7, 2008 in the event that the Court of Appeals affirms the lower court’s decision to revoke its coastwise endorsement (the “Undertaking”). On July 2, 2008, Shipbuilders commenced a second civil action in the U.S. District Court for the Eastern District of Virginia, entitled Shipbuilders Council of America, Inc., et al. v. U.S. Department of Homeland Security, et al., No. 1:08cv680 (E.D. Va.) (the “SB Challenge Litigation”), alleging essentially identical claims as those asserted in the SB Trader Litigation against MTS’s second retrofitted tanker, the Seabulk Challenge. MTS has intervened in the SB Challenge Litigation that was stayed pending the decision of the Court of Appeals in the SB Trader Litigation. In September 2009, the Court of Appeals reversed the District Court, holding that the USCG’s interpretation was correct and that the District Court erred in requiring MTS to provide the Undertaking. On January 19, 2010, the District Court: (i) vacated its April 24, 2008 Order to the extent that it directed the USCG to revoke the coastwise endorsement for the Seabulk Trader; (ii) vacated its November 14, 2008 Order providing for the Undertaking; and (iii) remanded the matter to the USCG for further proceedings to reconsider the decision to grant a coastwise endorsement of the Seabulk Trader consistent with the opinion of the Court of Appeals. The loss of coastwise eligibility for its two retrofitted tankers could adversely affect the Company’s consolidated financial condition and its results of operations. The aggregate carrying value of the Company’s two retrofitted tankers was $49.5 million as of June 30, 2010 and such tankers contributed operating revenues of $9.0 million during the six months ended June 30, 2010.

Certain subsidiaries of the Company are participating employers in an industry-wide, multi-employer, defined benefit pension fund, the United Kingdom Merchant Navy Officers Pension Fund (“MNOPF”). Under the direction of a court order, any deficit of the MNOPF is to be remedied through funding contributions from all participating employers. The Company’s participation relates to officers employed between 1978 and 2002 by SEACOR’s Stirling group of companies (which had been acquired by SEACOR in 2001) and its predecessors. Based on an actuarial valuation of the MNOPF in 2003, the Company was invoiced and expensed $4.4 million in 2005, representing the Company’s allocated share of a total funding deficit of $412.0 million. Subsequent to this invoice, the pension fund trustees determined that $49.0 million of the $412.0 million deficit was deemed uncollectible due to the non-existence or liquidation of certain participating employers and the Company was invoiced and expensed $0.6 million in March 2007 for its allocated share of the uncollectible deficit. Based on an actuarial valuation of the MNOPF in 2006, the Company was invoiced and expensed $3.9 million in September 2007, representing the Company’s allocated share of an additional funding deficit of $332.6 million. The results of the most recent actuarial valuation of the MNOPF in 2009 indicated that an additional net funding deficit of $587.8 million (£390.0 million) had developed since the previous actuarial valuation in 2006 and the Company

 

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estimates its allocated share of the deficit to be $7.5 million (£5.0 million). When the Company is invoiced for its share, it will recognize payroll related operating expenses in the periods invoices are received. Depending on the results of future actuarial valuations, it is possible that the MNOPF will experience further funding deficits, requiring the Company to recognize payroll related operating expenses in the periods invoices are received.

A subsidiary of the Company is a participating employer in an industry-wide, multi-employer, defined benefit pension fund, the United Kingdom Merchant Navy Ratings Pension Fund (“MNRPF”). The Company’s participation relates to ratings employed between 1978 and 2001 by SEACOR’s Stirling group of companies (which had been acquired by SEACOR in 2001) and its predecessors. Based on an actuarial valuation in March 2008, the MNRPF has an accumulated funding deficit of $306.0 million (£203.0 million). No decision has yet been reached as to how the deficit will be recovered, but the Company expects it is likely that participating employers will be invoiced for their allocated share, at which time the Company would recognize payroll related operating expenses. The Company estimates its allocated share of the uninvoiced deficit to be approximately $1.1 million (£0.7 million). Depending on the results of the most recent and future actuarial valuations, it is possible that the MNRPF will experience further funding deficits, requiring the Company to recognize payroll related operating expenses in the periods invoices are received.

On June 12, 2009, a purported civil class action was filed against SEACOR, Era Group Inc., Era Aviation, Inc., Era Helicopters LLC and two other defendants (collectively the “Defendants”) in the U.S. District Court for the District of Delaware, Superior Offshore International, Inc. v. Bristow Group Inc., et al., No. 09-CV-438 (D.Del.). SEACOR acquired Era Group Inc., Era Aviation, Inc., and Era Helicopters LLC in December 2004. The complaint alleges that the Defendants violated federal antitrust laws by conspiring with each other to raise, fix, maintain or stabilize prices for offshore helicopter services in the U.S. Gulf of Mexico during the period January 2001 to December 2005. The purported class of plaintiffs includes all direct purchasers of such services and the relief sought includes compensatory damages and treble damages. The Company is unable to estimate the potential exposure, if any, resulting from these claims but believes they are without merit and intends to vigorously defend the action. On September 4, 2009, the Defendants filed a motion to dismiss the complaint. The District Court has yet to rule on that motion.

On July 14, 2010, a group of individuals and entities purporting to represent a class commenced a civil action in the U.S. District Court for the Eastern District of Louisiana, Terry G. Robin, et al. v. Seacor Marine, L.L.C., et al., No. 2:10-cv-01986 (E.D. La.), in which they assert that support vessels, including vessels owned by the Company, responding to the explosion and resulting fire that occurred aboard the semi-submersible drilling rig, the Deepwater Horizon, were negligent in their efforts to save lives and put out the fire and contributed to the sinking of the Deepwater Horizon and subsequent oil spill. The complaint seeks compensatory, punitive, exemplary, and other damages. The Company believes that this lawsuit brought by class action lawyers targeting emergency responders acting under the direction of the U.S. Coast Guard has no merit and will seek its dismissal.

On July 20, 2010, two individuals purporting to represent a class commenced a civil action in the Civil District Court for the Parish of Orleans in the State of Louisiana, John Wunstell, Jr. and Kelly Blanchard v. BP, et al., No. 2010-7437 (Division K) (the “Wunstell Action”), in which they assert, among other theories, that Mr. Wunstell suffered injuries as a result of his exposure to certain noxious fumes and chemicals in connection with the provision of remediation, containment and response services by O’Brien’s Response Management Inc., a subsidiary of SEACOR. The complaint also seeks to establish a “class-wide court-supervised medical monitoring program” for all individuals “participating in BP’s Deepwater Horizon Vessels of Opportunity Program and/or Horizon Response Program” who allegedly experience injuries similar to Mr. Wunstell. The Company believes this lawsuit has no merit and will seek its dismissal.

In the normal course of its business, the Company becomes involved in various other litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. Management has used estimates in determining the Company’s potential exposure to these matters and has

 

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recorded reserves in its financial statements related thereto where appropriate. It is possible that a change in the Company’s estimates of that exposure could occur, but the Company does not expect that any such change in estimated costs would have a material effect on the Company’s consolidated financial position or its results of operations.

 

8. Long-Term Debt and Capital Lease Obligations

As of June 30, 2010, the Company had $125.0 million of outstanding borrowings under its revolving credit facility. The remaining availability under this facility was $324.5 million, net of issued letters of credit of $0.5 million. In addition, the Company had other outstanding letters of credit totaling $44.1 million with various expiration dates through 2014.

During the six months ended June 30, 2010, the Company made payments on long-term debt and capital lease obligations of $5.3 million and made net payments on inventory financing arrangements of $19.3 million.

During the six months ended June 30, 2010, the Company redeemed all of the outstanding bonds on two of the Company’s double hull product tankers, in principal amount of $61.9 million, for an aggregate purchase price of $63.0 million, including a make-whole premium, resulting in a loss on debt extinguishment of $0.2 million.

SEACOR’s Board of Directors has previously authorized the Company to purchase any or all of its 5.875% Senior Notes due 2012 and its 7.375% Senior Notes due 2019, which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. During the six months ended June 30, 2010, the Company purchased $2.4 million, in principal amount, of its 5.875% Senior Notes due 2012, for an aggregate purchase price of $2.5 million, resulting in a loss on debt extinguishment of $0.2 million.

 

9. Stock Repurchases

SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire shares of SEACOR common stock, par value $0.01 per share (“Common Stock”), which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. During the six months ended June 30, 2010, the Company acquired for treasury 1,615,900 shares of Common Stock for an aggregate purchase price of $120.0 million. On February 18, 2010, SEACOR’s Board of Directors increased the repurchase authority up to $250.0 million and, as of June 30, 2010, the remaining authority under the repurchase plan was $130.1 million.

 

10. Earnings Per Common Share of SEACOR

Basic earnings per common share of SEACOR are computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings per common share of SEACOR are computed based on the weighted average number of common shares issued and outstanding plus the effect of potentially dilutive securities through the application of the treasury stock and if-converted methods. Dilutive securities for this purpose assumes restricted stock grants have vested, common shares have been issued pursuant to the exercise of outstanding stock options and common shares have been issued pursuant to the conversion of outstanding convertible debentures. For the three and six months ended June 30, 2010, diluted earnings per common share of SEACOR excluded 894,714 and 878,807, respectively, of certain share awards as the effect of their inclusion in the computation would have been antidilutive. For the three and six months ended June 30, 2009, diluted earnings per common share of SEACOR excluded 821,519 and 896,874, respectively, of certain share awards as the effect of their inclusion in the computation would have been antidilutive.

 

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Computations of basic and diluted earnings per common share of SEACOR for the three and six months ended June 30 were as follows (in thousands, except per share data).

 

     Three Months Ended    Six Months Ended
     Net
Income
   Average O/S
    Shares    
   Per
Share
   Net
Income
   Average O/S
    Shares    
   Per
Share

2010

                 

Basic Earnings Per Common Share of SEACOR Holdings Inc.

   $ 64,082    21,733    $ 2.95    $ 67,683    22,000    $ 3.08

Effect of Dilutive Securities, net of tax:

                 

Options and Restricted Stock

        172            187   
                             

Diluted Earnings Per Common Share of SEACOR Holdings Inc.

   $ 64,082    21,905    $ 2.93    $ 67,683    22,187    $ 3.05
                             

2009

                 

Basic Earnings Per Common Share of SEACOR Holdings Inc.

   $ 42,308    19,845    $ 2.13    $ 95,302    19,803    $ 4.81

Effect of Dilutive Securities, net of tax:

                 

Options and Restricted Stock

        311            314   

Convertible Securities

     2,529    3,372         5,087    3,394   
                             

Diluted Earnings Per Common Share of SEACOR Holdings Inc.

   $ 44,837    23,528    $ 1.91    $ 100,389    23,511    $ 4.27
                             
                 

 

11. Comprehensive Income

For the three months ended June 30, 2010 and 2009, total comprehensive income was $62.7 million and $50.6 million, respectively. For the six months ended June 30, 2010 and 2009, total comprehensive income was $63.9 million and $103.8 million, respectively. The components of other comprehensive income (loss) and allocated income tax (expense) benefit for the three and six months ended June 30 were as follows (in thousands):

 

     Three Months Ended     Six Months Ended  
     Before-Tax
Amount
    Tax
(Expense)
Benefit
    After-Tax
Amount
    Before-Tax
Amount
    Tax
(Expense)
Benefit
    After-Tax
Amount
 

2010

            

Foreign currency translation adjustments

   $ (635   $ 223      $ (412   $ (3,062   $ 1,072      $ (1,990

Derivative losses on cash flow hedges (see Note 3)

     (2,407     842        (1,565     (3,983     1,394        (2,589
                                                

Other comprehensive loss

   $ (3,042   $ 1,065      $ (1,977   $ (7,045   $ 2,466      $ (4,579
                                                

2009

            

Foreign currency translation adjustments

   $ 11,045      $ (3,865   $ 7,180      $ 10,226      $ (3,579   $ 6,647   

Derivative gains on cash flow hedges (see Note 3)

     1,158        (406     752        1,102        (386     716   
                                                

Other comprehensive income

   $ 12,203      $ (4,271   $ 7,932      $ 11,328      $ (3,965   $ 7,363   
                                                

 

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12. Share Based Compensation

The following transactions have occurred in connection with the Company’s share based compensation plans during the six months ended June 30, 2010:

 

Director stock awards granted

   2,250   
      

Employee Stock Purchase Plan (“ESPP”) shares issued

   20,214   
      

Restricted stock awards granted

   169,162   
      

Restricted stock awards cancelled

   1,850   
      

Shares released from Deferred Compensation Plan

   2,206   
      

Restricted Stock Unit Activities:

  

Outstanding as of December 31, 2009

   1,070   

Granted

   63   

Converted to shares and issued to Deferred Compensation Plan

   (295
      

Outstanding as of June 30, 2010

   838   
      

Stock Option Activities:

  

Outstanding as of December 31, 2009

   1,220,601   

Granted

   133,440   

Exercised

   (29,375

Forfeited

   (6,100

Expired

   (3,950
      

Outstanding as of June 30, 2010

   1,314,616   
      

Shares available for future grants and ESPP purchases as of June 30, 2010

   1,251,058   
      

 

13. Segment Information

Accounting standards require public business enterprises to report information about each of their operating business segments that exceed certain quantitative thresholds or meet certain other reporting requirements. Operating business segments have been defined as a component of an enterprise about which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s basis of measurement of segment profit or loss is as previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

 

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The following tables summarize the operating results, capital expenditures and assets of the Company’s reportable segments.

 

    Offshore
Marine
Services
$’000
  Marine
Transportation
Services

$’000
    Inland
River
Services
$’000
  Aviation
Services
$’000
    Environmental
Services

$’000
    Commodity
Trading
and Logistics
$’000
    Other
$’000
    Corporate
and
Eliminations
$’000
    Total
$’000
 

For the three months ended June 30, 2010

                 

Operating Revenues:

                 

External customers

  142,825   21,263      31,544   62,433      214,629      203,064      18,818           694,576   

Intersegment

  4,298        3,052                  151      (7,501     
                                                 
  147,123   21,263      34,596   62,433      214,629      203,064      18,969      (7,501   694,576   
                                                 

Costs and Expenses:

                 

Operating

  80,011   8,915      21,547   40,541      127,108      203,374      10,895      (7,649   484,742   

Administrative and general

  12,931   1,038      2,618   6,091      6,525      3,791      2,793      10,321      46,108   

Depreciation and amortization

  13,245   8,008      4,958   10,728      2,099      15      2,107      448      41,608   
                                                 
  106,187   17,961      29,123   57,360      135,732      207,180      15,795      3,120      572,458   
                                                 

Gains (Losses) on Asset Dispositions

  1,964   (11   899   379      (36        1,203           4,398   
                                                 

Operating Income (Loss)

  42,900   3,291      6,372   5,452      78,861      (4,116   4,377      (10,621   126,516   
                                                 

Other Income (Expense):

                 

Derivative gains (losses), net

           38           4,611           (9,370   (4,721

Foreign currency gains (losses), net

  425   (41     (1,731   (23   (30   (15   (6,085   (7,500

Other, net

                     6      34      6      46   

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

  1,713        805   (442   54      (13   759           2,876   
                                         

Segment Profit

  45,038   3,250      7,177   3,317      78,892      458      5,155       
                                         

Other Income (Expense) not included in Segment Profit

  

  (15,171

Less Equity Earnings included in Segment Profit

  

  (2,876
                     

Income Before Taxes and Equity Earnings

  

  99,170   
                     
                 

 

19


Table of Contents
    Offshore
Marine
Services
$’000
  Marine
Transportation
Services

$’000
    Inland
River
Services
$’000
  Aviation
Services
$’000
    Environmental
Services

$’000
    Commodity
Trading
and Logistics
$’000
    Other
$’000
    Corporate
and
Eliminations
$’000
    Total
$’000
 

For the six months ended June 30, 2010

                 

Operating Revenues:

                 

External customers

  249,054   40,715      61,679   112,756      242,787      346,056      36,104           1,089,151   

Intersegment

  5,255        6,353   (48             305      (11,865     
                                                 
  254,309   40,715      68,032   112,708      242,787      346,056      36,409      (11,865   1,089,151   
                                                 

Costs and Expenses:

                 

Operating

  153,775   22,347      41,101   72,567      147,445      350,746      20,934      (11,868   797,047   

Administrative and general

  25,380   1,875      4,679   11,482      12,562      6,535      5,638      18,848      86,999   

Depreciation and amortization

  26,723   16,016      9,834   21,175      4,082      35      4,290      850      83,005   
                                                 
  205,878   40,238      55,614   105,224      164,089      357,316      30,862      7,830      967,051   
                                                 

Gains (Losses) on Asset Dispositions

  14,615   (11   1,786   469      (53        1,203      48      18,057   
                                                 

Operating Income (Loss)

  63,046   466      14,204   7,953      78,645      (11,260   6,750      (19,647   140,157   
                                                 

Other Income (Expense):

                 

Derivative gains (losses), net

           (62        8,919           (10,802   (1,945

Foreign currency gains (losses), net

  799   (26     (1,596   7      (747   (33   (8,605   (10,201

Other, net

         10             6      34      596      646   

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

  3,964        707   (717   92      (1,035   734           3,745   
                                         

Segment Profit (Loss)

  67,809   440      14,921   5,578      78,744      (4,117   7,485       
                                         

Other Income (Expense) not included in Segment Profit

  

  (24,175

Less Equity Earnings included in Segment Profit

  

  (3,745
                     

Income Before Taxes and Equity Earnings

  

  104,482   
                     

Capital Expenditures

  15,864   99      18,780   62,725      3,543                13,990      115,001   
                                                 

As of June 30, 2010

                 

Property and Equipment

  672,114   349,025      277,088   576,030      36,275      181      144,814      19,609      2,075,136   

Investments, at Equity, and Receivables from 50% or Less Owned Companies

  34,659   7,450      93,506   25,138      2,251      13,974      24,496           201,474   

Goodwill

  13,367        1,743   353      37,888           1,302           54,653   

Intangible Assets

  9,119   2,135      1,279        8,078           584           21,195   

Other current and long-term assets, excluding cash and near cash assets(1)

  188,349   9,541      50,156   67,975      178,894      87,624      44,536      25,797      652,872   
                                         

Segment Assets

  917,608   368,151      423,772   669,496      263,386      101,779      215,732       
                                         

Cash and near cash assets(1)

                  721,560   
                     

Total Assets

                  3,726,890   
                     
                 

 

(1) Cash and near cash assets includes cash, cash equivalents, restricted cash, marketable securities, construction reserve funds and Title XI reserve funds.

 

20


Table of Contents
    Offshore
Marine
Services
$’000
    Marine
Transportation
Services

$’000
  Inland
River
Services
$’000
  Aviation
Services
$’000
    Environmental
Services

$’000
  Commodity
Trading
and Logistics
$’000
  Other
$’000
    Corporate
and
Eliminations
$’000
    Total
$’000
 

For the three months ended June 30, 2009

                 

Operating Revenues:

                 

External customers

  145,436      24,095   26,842   57,699      33,167   85,852   16,142           389,233   

Intersegment

  1,030        3,321   1      8     99      (4,459     
                                             
  146,466      24,095   30,163   57,700      33,175   85,852   16,241      (4,459   389,233   
                                             

Costs and Expenses:

                 

Operating

  81,609      11,792   17,839   37,312      23,656   79,165   9,214      (4,456   256,131   

Administrative and general

  10,935      942   2,048   5,649      5,966   3,468   2,607      8,443      40,058   

Depreciation and amortization

  13,802      7,999   4,950   9,070      1,739   2   1,973      293      39,828   
                                             
  106,346      20,733   24,837   52,031      31,361   82,635   13,794      4,280      336,017   
                                             

Gains (Losses) on Asset Dispositions and Impairments, Net

  361        396   (1,104   4     330      (2   (15
                                             

Operating Income (Loss)

  40,481      3,362   5,722   4,565      1,818   3,217   2,777      (8,741   53,201   
                                             

Other Income (Expense):

                 

Derivative gains (losses), net

  (18       (78     588        3,273      3,765   

Foreign currency gains, net

  479      25     937      53   289   128      4,936      6,847   

Other, net

  (4              26        (23   (1

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

  3,380        702   270      15   32   (908        3,491   
                                     

Segment Profit

  44,318      3,387   6,424   5,694      1,886   4,152   1,997       
                                     

Other Income (Expense) not included in Segment Profit

  

  (1,746

Less Equity Earnings included in Segment Profit

  

  (3,491
                     

Income Before Taxes and Equity Earnings

  

  62,066   
                     
                 

 

21


Table of Contents
    Offshore
Marine
Services
$’000
    Marine
Transportation
Services

$’000
    Inland
River
Services
$’000
  Aviation
Services
$’000
    Environmental
Services

$’000
  Commodity
Trading
and Logistics
$’000
  Other
$’000
    Corporate
and
Eliminations
$’000
    Total
$’000
 

For the six months ended June 30, 2009

                 

Operating Revenues:

                 

External customers

  308,920      50,632      62,061   117,077      67,351   150,355   32,353           788,749   

Intersegment

  2,329           5,116   8      58     234      (7,745     
                                               
  311,249      50,632      67,177   117,085      67,409   150,355   32,587      (7,745   788,749   
                                               

Costs and Expenses:

                 

Operating

  160,448      28,563      37,248   77,629      47,733   141,036   19,918      (8,032   504,543   

Administrative and general

  21,133      2,126      4,184   9,800      13,207   5,307   4,833      18,150      78,740   

Depreciation and amortization

  27,491      15,998      9,816   17,776      3,493   2   3,925      591      79,092   
                                               
  209,072      46,687      51,248   105,205      64,433   146,345   28,676      10,709      662,375   
                                               

Gains (Losses) on Asset Dispositions and Impairments, Net

  14,807           2,657   (1,059   12     330      (2   16,745   
                                               

Operating Income (Loss)

  116,984      3,945      18,586   10,821      2,988   4,010   4,241      (18,456   143,119   
                                               

Other Income (Expense):

                 

Derivative gains (losses), net

  (18          313        1,537        5,544      7,376   

Foreign currency gains (losses), net

  1,844      (9     1,366      20   272   131      3,881      7,505   

Other, net

  168                    26   (53   48      189   

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

  5,771           1,874   (4   101   187   (911        7,018   
                                       

Segment Profit

  124,749      3,936      20,460   12,496      3,109   6,032   3,408       
                                       

Other Income (Expense) not included in Segment Profit

  

  (17,658

Less Equity Earnings included in Segment Profit

  

  (7,018
                     

Income Before Taxes and Equity Earnings

                  140,531   
                     

Capital Expenditures

  29,182           6,814   37,610      2,448     91      907      77,052   
                                               

As of June 30, 2009

                 

Property and Equipment

  781,925      380,436      277,254   495,978      32,818   135   136,832      3,984      2,109,362   

Investments, at Equity, and Receivables from 50% or Less Owned Companies

  31,265           79,704   27,893      1,991     10,009           150,862   

Goodwill

  13,367           1,493   353      37,066     1,302           53,581   

Intangible Assets

  11,425      2,525      1,607        9,768     693           26,018   

Other current and long-term assets, excluding cash and near cash assets(1)

  184,056      12,730      21,752   69,414      43,154   56,059   25,392      34,960      447,517   
                                       

Segment Assets

  1,022,038      395,691      381,810   593,638      124,797   56,194   174,228       
                                       

Cash and near cash assets(1)

                  749,355   
                     

Total Assets

                  3,536,695   
                     
                 

 

(1) Cash and near cash assets includes cash, cash equivalents, restricted cash, marketable securities, construction reserve funds and Title XI reserve funds.

 

22


Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concerning management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of results to differ materially from any future results, performance or achievements discussed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: decreased demand and loss of revenues as a result of U.S. government implemented moratoriums directing operators to cease certain drilling activities and any extension of such moratoriums (the “Moratoriums”), weakening demand for the Company’s services as a result of unplanned customer suspensions, cancellations, rate reductions or non-renewals of vessel charters and aviation equipment or failures to finalize commitments to charter vessels and aviation equipment in response to Moratoriums, increased government legislation and regulation of the Company’s businesses could increase cost of operations, increased competition if the Jones Act is repealed, liability, legal fees and costs in connection with providing spill and emergency response services, including the Company’s involvement in response to the oil spill as a result of the sinking of the Deepwater Horizon in April 2010, decreased demand for the Company’s services as a result of declines in the global economy, declines in valuations in the global financial markets and illiquidity in the credit sectors, including, interest rate fluctuations, availability of credit, inflation rates, change in laws, trade barriers, commodity prices and currency exchange fluctuations, the cyclical nature of the oil and gas industry, loss of U.S. coastwise endorsement for the retro-fitted double-hull tankers, Seabulk Trader and Seabulk Challenge, if the Company is unsuccessful in litigation instructing the U.S. Coast Guard to revoke their coastwise charters, activity in foreign countries and changes in foreign political, military and economic conditions, changes in foreign and domestic oil and gas exploration and production activity, safety record requirements related to Offshore Marine Services, Marine Transportation Services and Aviation Services, decreased demand for Marine Transportation Services and Harbor and Offshore Towing Services due to construction of additional refined petroleum products, natural gas or crude oil pipelines or due to decreased demand for refined petroleum products, crude oil or chemical products or a change in existing methods of delivery, compliance with U.S. and foreign government laws and regulations, including environmental laws and regulations, the dependence of Offshore Marine Services, Marine Transportation Services and Aviation Services on several customers, consolidation of the Company’s customer base, the ongoing need to replace aging vessels and aircraft, industry fleet capacity, restrictions imposed by the Shipping Acts and Aviation Acts on the amount of foreign ownership of the Company’s Common Stock, operational risks of Offshore Marine Services, Marine Transportation Services, Harbor and Offshore Towing Services and Aviation Services, effects of adverse weather conditions and seasonality, future phase-out of Marine Transportation Services’ double-bottom tanker, dependence of spill response revenue on the number and size of spills and upon continuing government regulation in this area and Environmental Services’ ability to comply with such regulation and other governmental regulation, changes in National Response Corporation’s Oil Spill Removal Organization classification, liability in connection with providing spill response services, the level of grain export volume, the effect of fuel prices on barge towing costs, variability in freight rates for inland river barges, the effect of international economic and political factors in Inland River Services’ operations, adequacy of insurance coverage, the attraction and retention of qualified personnel by the Company and various other matters and factors, many of which are beyond the Company’s control. In addition, these statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors. Consequently, the following should not be considered a complete discussion of all potential risks or uncertainties. The words “estimate,” “project,” “intend,” “believe,” “plan” and similar expressions are intended to identify forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. The Company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. The forward-looking statements in this Form 10-Q should be evaluated together with the many uncertainties that

 

23


Table of Contents

affect the Company’s businesses, particularly those mentioned under “Forward-Looking Statements” in Item 7 on the Company’s Form 10-K and SEACOR’s periodic reporting on Form 8-K (if any), which are incorporated by reference.

Overview

The Company’s operations are divided into six main business segments – Offshore Marine Services, Marine Transportation Services, Inland River Services, Aviation Services, Environmental Services and Commodity Trading and Logistics. The Company also has activities that are referred to and described under Other that primarily includes Harbor and Offshore Towing Services, various other investments in joint ventures and lending and leasing activities.

Deepwater Horizon Oil Spill Response

The Company’s operating results for the three months ended June 30, 2010 were impacted by oil spill response activities relating to the BP Macondo well incident in the U.S. Gulf of Mexico following the sinking of the semi-submersible drilling rig Deepwater Horizon in April 2010 (the “Oil Spill Response”). Four of the Company’s business segments have been and continue to be actively engaged in the Oil Spill Response. Environmental Services is providing (i) vessels, equipment and people to support clean-up activities both on-shore and at sea, (ii) professional assistance, consulting services and software systems in support of incident management activities, and (iii) assistance in the provision of workers for clean-up operations. Offshore Marine Services is providing (i) vessels for a variety of functions including vessel decontamination, skimming, lightering, offshore traffic control and accommodation, and (ii) technical and video equipment on vessels engaged in the response to allow for instant tracking of assets and surveillance of operations. Aviation Services is providing (i) helicopters for air support to U.S. Coast Guard observers undertaking oil spotting and assessment missions, (ii) transportation for various other officials requiring overflights to assess the response and recovery efforts, and (iii) a flight tracking system to monitor the movement of all marine and aviation assets involved in the response. Harbor and Offshore Towing Services is providing tugs engaged in the decontamination of vessels transiting the region.

The impact of the Deepwater Horizon/BP Macondo well incident on the Company’s future operating results and cash flows is uncertain. Continuing demand for the Company’s assets and services provided in support of the Oil Spill Response will depend on many factors, including the magnitude and duration of ongoing clean-up activities. Oil Spill Response activities are expected to positively impact the Company’s results in the near term but are expected to decline as the oil spill is contained and remediated. As an active party to the Oil Spill Response, the Company has been named in individual and class action litigations involving environmental damage, business and personal injury claims that may result in financial exposure. In reaction to the Deepwater Horizon/BP Macondo well incident, the U.S. Department of the Interior issued an order on May 28, 2010 imposing a six month moratorium on all offshore deepwater drilling projects. A preliminary injunction was issued on June 22, 2010 blocking enforcement of the moratorium; however, the U.S. Department of Interior issued a new moratorium on July 12, 2010. The U.S. Department of Interior has also implemented additional safety and certification requirements for drilling activities, imposed additional requirements for the approval of development and production activities, and delayed the approval of applications to drill in both deepwater and shallow-water areas. The Company’s results, in particular those of its the Offshore Marine Services and Aviation Services segments, could be adversely impacted as a consequence of reduced drilling activities in the U.S. Gulf of Mexico. For additional information, see “Contingencies” included below and “Item 1A. Risk Factors” included in Part II.

 

24


Table of Contents

Consolidated Results of Operations

The sections below provide an analysis of the Company’s operations by business segment for the three months (“Current Year Quarter”) and six months (“Current Six Months”) ended June 30, 2010, as compared with the three months (“Prior Year Quarter”) and six months (“Prior Six Months”) ended June 30, 2009. See “Item 1. Financial Statements – Note 13. Segment Information” included in Part I for consolidating segment tables for each period presented.

Offshore Marine Services

 

    For the Three  Months
Ended June 30,
  For the Six Months
Ended June 30,
  Change
‘10/’09
 
    2010   2009   2010   2009   3 Mos    6 Mos  
    $’000   %   $’000     %   $’000   %   $’000     %   %    %  

Operating Revenues:

                    

United States

  79,527   54   52,373      36   119,011   47   128,222      41     
                                        

Africa, primarily West Africa

  19,708   13   29,215      20   38,583   15   58,278      19     

Middle East

  12,867   9   22,097      15   26,400   11   43,443      14     

Mexico, Central and South America

  13,547   9   18,220      12   25,714   10   34,545      11     

United Kingdom, primarily North Sea

  15,313   11   16,552      11   31,336   12   31,712      10     

Asia

  6,161   4   8,009      6   13,265   5   15,049      5     
                                        

Total Foreign

  67,596   46   94,093      64   135,298   53   183,027      59     
                                        
  147,123   100   146,466      100   254,309   100   311,249      100      (18
                                        

Costs and Expenses:

                    

Operating

  80,011   54   81,609      56   153,775   60   160,448      52     

Administrative and general

  12,931   9   10,935      7   25,380   10   21,133      7     

Depreciation and amortization

  13,245   9   13,802      9   26,723   11   27,491      9     
                                        
  106,187   72   106,346      72   205,878   81   209,072      68     
                                        

Gains on Asset Dispositions and Impairments, net

  1,964   1   361        14,615   6   14,807      5     
                                        

Operating Income

  42,900   29   40,481      28   63,046   25   116,984      37   6    (46
                                        

Other Income (Expense):

                    

Derivative losses, net

      (18         (18       

Foreign currency gains, net

  425   1   479        799     1,844      1     

Other, net

      (4         168          

Equity in Earnings of 50% or Less Owned Companies, Net of Tax

  1,713   1   3,380      2   3,964   2   5,771      2     
                                        

Segment Profit

  45,038   31   44,318      30   67,809   27   124,749      40   2    (46
                                        

Operating Revenues – Current Year Quarter compared with Prior Year Quarter. Operating revenues increased by $0.7 million in the Current Year Quarter compared with the Prior Year Quarter. Time charter revenues increased by $4.7 million and other operating revenues, including third party brokered vessel activity, bareboat charter revenues and other marine services, decreased by $4.0 million.

 

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The number of days available for charter in the Current Year Quarter was 12,232 compared with 14,064 in the Prior Year Quarter, a 1,832 or 13% reduction, due to net fleet dispositions, including the return of leased vessels to lessors. Overall fleet utilization was 77% in the Current Year Quarter compared with 75% in the Prior Year Quarter. Overall average day rates were $13,906 in the Current Year Quarter compared with $12,030 in the Prior Year Quarter, an increase of $1,876 per day, or 16%.

In the U.S. Gulf of Mexico, time charter revenues were $24.1 million higher in the Current Year Quarter compared with the Prior Year Quarter. Incremental charters in support of the Deepwater Horizon oil spill response contributed $27.6 million of additional time charter revenues.

In Africa, time charter revenues were $7.8 million lower in the Current Year Quarter primarily due to vessels mobilizing between geographic regions, fleet dispositions and lower utilization attributable to softer market conditions. Other operating revenues were $1.7 million lower primarily due to reduced third party brokered vessel activity.

In the Middle East, time charter revenues were $5.1 million lower in the Current Year Quarter primarily due to lower utilization attributable to softer market conditions and out-of-service time for one vessel undergoing conversion to standby safety configuration. Other operating revenues were $4.1 million lower primarily due to reduced third party brokered vessel activity.

In the United Kingdom, time charter revenues were $1.1 million lower in the Current Year Quarter primarily due to unfavorable changes in the USD/pound sterling exchange rate.

In Mexico, Central and South America, time charter revenues were $2.3 million lower in the Current Year Quarter primarily due to fleet dispositions. Other operating revenues were $2.3 million lower primarily due to the conclusion of bareboat charters for two vessels that subsequently mobilized to the U.S. Gulf of Mexico.

In Asia, time charter revenues were $3.1 million lower in the Current Year Quarter primarily due to net fleet dispositions. Other operating revenues were $1.2 million higher primarily due to the change in contract status of one vessel from time charter to bareboat.

As of June 30, 2010, the Company had deferred $18.5 million of vessel charter hire scheduled to be paid through the conveyance of a limited net profit interest in developmental oil and gas producing properties owned by a customer. Of this amount, $2.8 million was deferred during the Current Year Quarter. The Company expects to defer an additional $3.5 million of vessel charter hire under this arrangement through August 2010. The customer has provided payout estimates indicating the Company will receive future payments of $10.8 million in 2010 and $11.2 million in 2011. Such payments are contingent upon future production. Production from the properties commenced in April 2010 and the first payment of $0.1 million was received and recognized as revenue in June 2010. The Company will recognize revenues as cash is received or earlier should future payments become determinable.

Operating Revenues – Current Six Months compared with Prior Six Months. Operating revenues decreased by $56.9 million in the Current Six Months compared with the Prior Six Months. Time charter revenues decreased by $43.7 million and other operating revenues, including third party brokered vessel activity, bareboat charter revenues and other marine services, decreased by $13.2 million.

The number of days available for charter in the Current Six Months was 24,471 compared with 28,352 in the Prior Six Months, a 3,881 or 14% reduction, due to net fleet dispositions, including the return of leased vessels to lessors. Overall fleet utilization was 74% in the Current Six Months compared with 78% in the Prior Six Months. Overall average day rates were $12,672 in the Current Six Months compared with $12,421 in the Prior Six Months, an increase of $251 per day, or 2%.

In the U.S. Gulf of Mexico, time charter revenues were $11.6 million lower in the Current Six Months compared with the Prior Six Months. Time charter revenues from rig moving activities for anchor handling towing supply vessels were $20.3 million lower and time charter revenues for all other vessel classes were lower

 

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primarily due to a 2,388 or 18% reduction in days available as a result of net fleet dispositions. Incremental charters in support of the Deepwater Horizon oil spill response contributed $27.6 million of additional time charter revenues.

In Africa, time charter revenues were $16.5 million lower in the Current Six Months primarily due to vessels mobilizing between geographic regions, fleet dispositions and lower utilization attributable to softer market conditions. Other operating revenues were $3.1 million lower primarily due to reduced third party brokered vessel activity.

In the Middle East, time charter revenues were $9.5 million lower in the Current Six Months primarily due to lower utilization attributable to softer market conditions and out-of-service time for one vessel undergoing conversion to standby safety configuration. Other operating revenues were $7.6 million lower primarily due to reduced third party brokered vessel activity.

In Mexico, Central and South America, time charter revenues were $3.0 million lower in the Current Six Months primarily due to fleet dispositions. Other operating revenues were $5.8 million lower primarily due to the conclusion of bareboat charters for two vessels that subsequently mobilized to the U.S. Gulf of Mexico.

In Asia, time charter revenues were $2.9 million lower in the Current Six Months primarily due to net fleet dispositions. Other operating revenues were $1.1 million higher primarily due to the change in contract status of one vessel from time charter to bareboat.

As noted above, as of June 30, 2010, the Company had deferred $18.5 million of vessel charter hire scheduled to be paid through the conveyance of a limited net profit interest in developmental oil and gas producing properties owned by a customer. Of this amount, $7.5 million was deferred during the Current Six Months.

Operating Income – Current Year Quarter compared with Prior Year Quarter. Excluding the impact of gains on asset dispositions and impairments, operating income increased by $0.8 million. Operating expenses decreased by $1.6 million primarily due to net fleet dispositions. Administrative and general expenses increased by $2.0 million primarily due to the reversal of a doubtful debt reserve in the Prior Year Quarter and higher wage and benefit costs in the Current Year Quarter.

Operating Income – Current Six Months compared with Prior Six Months. Excluding the impact of gains on asset dispositions and impairments, operating income decreased by $53.7 million. The decrease in operating revenues noted above was partially offset by a $6.7 million reduction in operating expenses primarily due to net fleet dispositions. Administrative and general expenses increased by $4.2 million primarily due to higher professional fees and the reversal of a doubtful debt reserve in the Prior Six Months.

 

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Fleet Count. The composition of Offshore Marine Services’ fleet as of June 30 was as follows:

 

     Owned    Joint
Ventured
   Leased-in    Pooled or
Managed
   Total

2010

              

Anchor handling towing supply

   18    1    1       20

Crew

   41    2    11    3    57

Mini-supply

   6    1    5       12

Standby safety

   25    1          26

Supply

   11       8    8    27

Towing supply

   5    1    2    1    9

Specialty

   4    5       3    12
                        
   110    11    27    15    163
                        

2009

              

Anchor handling towing supply

   18    1    1    1    21

Crew

   42    2    23    1    68

Mini-supply

   7       5       12

Standby safety

   24             24

Supply

   12       8    8    28

Towing supply

   7    3    2    1    13

Specialty

   6    3          9
                        
   116    9    39    11    175
                        
              

 

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Operating Data. The table below sets forth the average rates per day worked, utilization and available days data for each group of Offshore Marine Services’ vessels operating under time charters for the periods indicated. The rate per day worked is the ratio of total time charter revenues to the aggregate number of days worked. Utilization is the ratio of aggregate number of days worked to total calendar days available for work. Available days represents the total calendar days during which owned and chartered-in vessels are operated by the Company.

 

     For the Three  Months
Ended June 30,
    For the Six Months
Ended June 30,
 
     2010     2009     2010     2009  

Rates Per Day Worked:

        

Anchor handling towing supply

   $ 40,592      $ 36,486      $ 36,524      $ 42,288   

Crew

     6,586        7,592        6,632        7,443   

Mini-supply

     9,641        6,286        8,413        6,021   

Standby safety

     7,861        8,522        8,080        8,137   

Supply

     14,402        14,716        13,780        15,534   

Towing supply

     10,467        11,973        11,255        11,779   

Specialty

     6,187        15,742        7,220        14,426   

Overall Average Rates Per Day Worked

     13,906        12,030        12,672        12,421   

Utilization:

        

Anchor handling towing supply

     89     66     75     70

Crew

     72     71     70     75

Mini-supply

     61     61     58     67

Standby safety

     88     88     88     89

Supply

     78     79     78     80

Towing supply

     81     98     78     94

Specialty

     64     82     65     91

Overall Fleet Utilization

     77     75     74     78

Available Days:

        

Anchor handling towing supply

     1,729        1,547        3,439        3,053   

Crew

     4,527        5,973        9,027        12,096   

Mini-supply

     1,001        1,319        1,991        2,697   

Standby safety

     2,222        2,184        4,382        4,344   

Supply

     1,729        1,820        3,439        3,620   

Towing supply

     690        819        1,499        1,690   

Specialty

     334        402        694        852   
                                

Overall Fleet Available Days

     12,232        14,064        24,471        28,352   
                                
        

 

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Marine Transportation Services

 

     For the Three  Months
Ended June 30,
   For the Six Months
Ended June 30,
   Change
‘10/’09
 
     2010    2009    2010    2009    3 Mos     6 Mos  
     $’000     %    $’000    %    $’000     %    $’000     %    %     %  

Operating Revenues:

                         

United States

   21,263      100    24,095    100    40,715      100    50,632      100    (12   (20
                                               

Costs and Expenses:

                         

Operating

   8,915      42    11,792    49    22,347      55    28,563      56     

Administrative and general

   1,038      5    942    4    1,875      5    2,126      4     

Depreciation and amortization

   8,008      38    7,999    33    16,016      39    15,998      32     
                                               
   17,961      85    20,733    86    40,238      99    46,687      92     
                                               

Losses on Asset Dispositions

   (11            (11               
                                             

Operating Income

   3,291      15    3,362    14    466      1    3,945      8    (2   (88
                                               

Other Income (Expense):

                         

Foreign currency gains (losses), net

   (41      25       (26      (9       
                                               

Segment Profit

   3,250      15    3,387    14    440      1    3,936      8    (4   (89
                                               

Operating Revenues – Current Year Quarter compared with Prior Year Quarter. Operating revenues were $2.8 million lower primarily due to a change in the contract status of the Oregon Voyager (formerly Seabulk Energy) from time charter to long-term bareboat charter, and a softer spot market in the Current Year Quarter.

Operating Revenues – Current Six Months compared with Prior Six Months. Operating revenues were $9.9 million lower primarily due to the change in the contract status of the Oregon Voyager, more out-of-service time for drydockings and a softer spot market in the Current Six Months.

Operating Income – Current Year Quarter compared with Prior Year Quarter. Operating income was $0.1 million lower primarily due to the reductions in operating revenues noted above, partially offset by lower operating expenses as a result of the change in the contract status of the Oregon Voyager.

Operating Income – Current Six Months compared with Prior Six Months. Operating income was $3.5 million lower primarily due to the reductions in operating revenues noted above and higher drydocking expenses, partially offset by lower operating expenses primarily as a result of the change in contract status for the Oregon Voyager.

Fleet Count. As of June 30, 2010 and 2009, Marine Transportation Services owned eight U.S.-flag product tankers operating in the domestic coastwise trade.

 

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Inland River Services

 

     For the Three  Months
Ended June 30,
   For the Six Months
Ended June 30,
   Change
‘10/’09
 
     2010    2009    2010    2009    3 Mos    6 Mos  
     $’000    %    $’000    %    $’000    %    $’000    %    %    %  

Operating Revenues:

                             

United States

   34,596    100    30,163    100    68,032    100    67,177    100    15    1   
                                             

Costs and Expenses:

                             

Operating

   21,547    62    17,839    59    41,101    60    37,248    55      

Administrative and general

   2,618    8    2,048    7    4,679    7    4,184    6      

Depreciation and amortization

   4,958    14    4,950    16    9,834    15    9,816    15      
                                             
   29,123    84    24,837    82    55,614    82    51,248    76      
                                             

Gains on Asset Dispositions

   899    3    396    1    1,786    3    2,657    4      
                                             

Operating Income

   6,372    19    5,722    19    14,204    21    18,586    28    11    (24
                                             

Other Income (Expense):

                             

Other, net

               10               

Equity in Earnings of 50% or Less Owned Companies, Net of Tax

   805    2    702    2    707    1    1,874    2      
                                             

Segment Profit

   7,177    21    6,424    21    14,921    22    20,460    30    12    (27
                                             
                             

Operating Results – Current Year Quarter compared with Prior Year Quarter. Operating revenues increased by $4.4 million primarily due to higher dry cargo pool participation as a result of changes in contract status from chartered-out barges and the addition of new equipment. Excluding the impact of gains on asset dispositions, operating income increased by $0.1 million as the increases in operating revenues were offset by higher wage and benefit costs due to additional manpower.

Operating Results – Current Six Months compared with Prior Six Months. Operating revenues increased by $0.9 million primarily due to higher dry cargo pool participation as described above and increased liquid terminal activity, partially offset by the loss of revenue following the contribution of three towboats to a joint venture during the third quarter of 2009. Excluding the impact of gains on asset dispositions, operating income decreased by $3.5 million primarily due to difficult operating conditions and higher fuel prices during the first quarter of 2010 compared with the first quarter of 2009 resulting in higher towing, fleeting and switching costs.

 

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Fleet Count. The composition of Inland River Services’ fleet as of June 30 was as follows:

 

     Owned    Joint
Ventured
   Leased-in    Pooled or
Managed
   Total

2010

              

Inland river dry cargo barges

   619    262    2    566    1,449

Inland river liquid tank barges

   51    34    2       87

Inland river deck barges

   26             26

Inland river towboats

   17    12          29

Dry cargo vessels(1)

      1          1
                        
   713    309    4    566    1,592
                        

2009

              

Inland river dry cargo barges

   582    262    2    113    959

Inland river liquid tank barges

   51    34    2       87

Inland river deck barges

   26             26

Inland river towboats

   18    5          23

Dry cargo vessels(1)

      1          1
                        
   677    302    4    113    1,096
                        

 

(1) Argentine-flag.

 

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Aviation Services

 

     For the Three  Months
Ended June 30,
    For the Six Months
Ended June 30,
   Change
‘10/’09
 
     2010     2009     2010     2009    3 Mos     6 Mos  
     $’000     %     $’000     %     $’000     %     $’000     %    %     %  

Operating Revenues:

                     

United States

   48,452      78      50,689      88      86,523      77      102,202      87     

Foreign

   13,981      22      7,011      12      26,185      23      14,883      13     
                                                   
   62,433      100      57,700      100      112,708      100      117,085      100    8      (4
                                                   

Costs and Expenses:

                     

Operating

   40,541      65      37,312      65      72,567      64      77,629      66     

Administrative and general

   6,091      10      5,649      9      11,482      10      9,800      8     

Depreciation and amortization

   10,728      17      9,070      16      21,175      19      17,776      15     
                                                   
   57,360      92      52,031      90      105,224      93      105,205      89     
                                                   

Gains (Losses) on Asset Dispositions and Impairments, Net

   379      1      (1,104   (2   469           (1,059   (1)     
                                                   

Operating Income

   5,452      9      4,565      8      7,953      7      10,821      10    19      (27
                                                   

Other Income (Expense):

                     

Derivative gains (losses), net

   38           (78        (62        313          

Foreign currency gains (losses), net

   (1,731   (3   937      2      (1,596   (1   1,366      1     

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

   (442   (1   270           (717   (1   (4       
                                                   

Segment Profit

   3,317      5      5,694      10      5,578      5      12,496      11    (42   (55
                                                   

Operating Revenues – Current Year Quarter compared with Prior Year Quarter. Operating revenues increased by $4.7 million. In the United States, operating revenues were lower primarily due to the termination of several contracts in Air Medical Services, partially offset by incremental work in support of the Deepwater Horizon oil spill response. Foreign operating revenues improved as additional aircraft were placed on long-term leases and short-term contracts.

Operating Revenues – Current Six Months compared with Prior Six Months. Operating revenues decreased by $4.4 million. In the United States, operating revenues were lower primarily due to the termination of several contracts in Air Medical Services and a reduction in the number of aircraft and lower flight hours in the U.S. Gulf of Mexico primarily due to decreased drilling activity, partially offset by incremental work in support of the Deepwater Horizon oil spill response. Operating revenues in Alaska were higher primarily due to an additional oil and gas contract, partially offset by lower flightseeing revenues as a result of a reduction in tourist activity. Foreign operating revenues improved as additional aircraft were placed on long-term leases and short-term contracts.

 

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Table of Contents

Operating Income – Current Year Quarter compared with Prior Year Quarter. Excluding the impact of gains on asset dispositions and impairments, operating income decreased by $0.6 million primarily due to lower margins in Alaska as a result of higher repair and maintenance costs and a reduction in flightseeing activity levels, and a hurricane insurance recovery in the Prior Year Quarter. These decreases were partially offset by additional aircraft being placed in international leasing activities and higher activity levels in the U.S. Gulf of Mexico in support of the Deepwater Horizon oil spill response.

Operating Income – Current Six Months compared with Prior Six Months. Excluding the impact of gains on asset dispositions and impairments, operating income decreased by $4.4 million primarily due to lower operating revenues described above. In the Prior Six Months, operating expenses included a hurricane insurance recovery and general and administrative expenses included the reversal of a bad debt provision for an Alaska-based customer following collection.

Fleet Count. The composition of Aviation Services’ fleet as of June 30 was as follows:

 

     Owned(1)    Joint
Ventured
   Leased-in(2)    Managed    Total

2010

              

Light helicopters – single engine

   51    6    3       60

Light helicopters – twin engine

   31       6    9    46

Medium helicopters

   54       2    3    59

Heavy helicopters

   9             9
                        
   145    6    11    12    174
                        

2009

              

Light helicopters – single engine

   51    6    3       60

Light helicopters – twin engine

   35       6    9    50

Medium helicopters

   52       3    6    61

Heavy helicopters

   7       1       8
                        
   145    6    13    15    179
                        

 

(1)

Excludes one helicopter removed from service as of June 30, 2010 and 2009, respectively, and excludes three helicopters removed from service and disassembled for spare parts as of June 30, 2010.

 

(2) Excludes three helicopters removed from service as of June 30, 2010 and 2009, respectively.

 

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Table of Contents

Environmental Services

 

    For the Three  Months
Ended June 30,
  For the Six Months
Ended June 30,
  Change
‘10/’09
    2010   2009   2010   2009   3 Mos   6 Mos
    $’000     %   $’000   %   $’000     %   $’000   %   %   %

Operating Revenues:

                   

United States

  208,531      97   28,378   86   230,761      95   57,251   85    

Foreign

  6,098      3   4,797   14   12,026      5   10,158   15    
                                       
  214,629      100   33,175   100   242,787      100   67,409   100   547   260
                                       

Costs and Expenses:

                   

Operating

  127,108      59   23,656   71   147,445      61   47,733   71    

Administrative and general

  6,525      3   5,966   18   12,562      5   13,207   20    

Depreciation and amortization

  2,099      1   1,739   5   4,082      2   3,493   5    
                                       
  135,732      63   31,361   94   164,089      68   64,433   96    
                                       

Gains (Losses) on Asset Dispositions

  (36     4     (53     12      
                                       

Operating Income

  78,861      37   1,818   6   78,645      32   2,988   4   4238   2532
                                       

Other Income (Expense):

                   

Foreign currency gains (losses), net

  (23     53     7        20      

Equity in Earnings of 50% or Less Owned Companies, Net of Tax

  54        15     92        101      
                                     

Segment Profit

  78,892      37   1,886   6   78,744      32   3,109   4   4083   2433
                                       
                   

Operating Results. Operating results improved in the Current Year Quarter and Current Six Months primarily due to services provided in support of the Deepwater Horizon oil spill response as previously discussed in “Overview” on page 24.

 

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Table of Contents

Commodity Trading and Logistics

 

    For the Three  Months
Ended June 30,
  For the Six Months
Ended June 30,
  Change
‘10/’09
 
    2010     2009   2010     2009   3 Mos     6 Mos  
    $’000     %     $’000   %   $’000     %     $’000   %   %     %  

Operating Revenues:

                   

United States

  176,400      87      52,502   61   310,146      90      101,990   68    

Foreign

  26,664      13      33,350   39   35,910      10      48,365   32    
                                           
  203,064      100      85,852   100   346,056      100      150,355   100   137      130   
                                           

Costs and Expenses:

                   

Operating

  203,374      100      79,165   92   350,746      101      141,036   94    

Administrative and general

  3,791      2      3,468   4   6,535      2      5,307   3    

Depreciation

  15           2     35           2      
                                           
  207,180      102      82,635   96   357,316      103      146,345   97    
                                           

Operating Income (Loss)

  (4,116   (2   3,217   4   (11,260   (3   4,010   3   (228   (381
                                           

Other Income (Expense):

                   

Derivative gains, net

  4,611      2      588   1   8,919      2      1,537   1    

Foreign currency gains (losses), net

  (30        289     (747        272      

Other, net

  6           26     6           26      

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

  (13        32     (1,035        187      
                                           

Segment Profit (Loss)

  458           4,152   5   (4,117   (1   6,032   4   (89   (168
                                           

Operating Revenues – Current Year Quarter compared with Prior Year Quarter. Operating revenues increased by $117.2 million primarily due to higher sales volumes of renewable fuels and blendstocks and the financial consolidation of sugar trading activities following the Company’s acquisition of a majority interest in its joint venture in June 2009.

Operating Revenues – Current Six Months compared with Prior Six Months. Operating revenues increased by $195.7 million primarily due to higher sales volumes of renewable fuels and blendstocks and the financial consolidation of sugar trading activities as described above, partially offset by lower sales volumes and lower prices for rice trading activities.

Segment Profit. Segment profit decreased by $3.7 million in the Current Year Quarter compared with the Prior Year Quarter and decreased by $10.1 million in the Current Six Months compared with the Prior Six Months primarily due to difficult conditions in rice trading markets. The Company has decided to reduce its future rice trading activities and intends to liquidate its rice inventories by the end of the third quarter of 2010.

Equity in Earnings (Losses) of 50% or Less Owned Companies. Equity in losses of 50% or less owned companies in the Current Six Months were primarily due to start-up activities at the Company’s alcohol manufacturing facility joint venture.

 

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Table of Contents

Other Segment Profit

 

     For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
    Change
‘10/’09
 
         2010             2009             2010             2009         3 Mos     6 Mos  
     $’000     $’000     $’000     $’000     %     %  

Harbor and Offshore Towing Services

   4,946      3,284      7,655      4,954      51      55   

Other Activities

   (550   (379   (904   (635   (45   (42

Equity in Earnings (Losses) of 50% or Less Owned Companies

   759      (908   734